LOS ANGELES — CBRE says in its latest outlook report that 2021 should see a strengthened recovery of all U.S. commercial real estate sectors as the broader economy bounces back from the pandemic-induced recession and even as a potentially split federal government tempers fiscal stimulus plans.
CBRE anticipates that sectors like office, retail and hotels will begin a slow recovery next year, states a recent release. Meanwhile, industrial and logistics real estate and data centres will extend an early rapid recovery that is already underway, and multifamily will start its own swift rebound.
All sectors will benefit from the widespread availability of a vaccine, a prospect that was enhanced by Pfizer’s Nov. 9 announcement of a treatment that it says proved 90 per cent effective in preliminary trials.
CBRE outlines in its new 2021 U.S. Real Estate Market Outlook that it expects interest rates will remain low, even as GDP rebounds by 4.5 per cent next year. The spending plans of President-Elect Joe Biden will be moderated if the GOP retains control of the Senate after two run-off elections in Georgia in early January.
Elsewhere, the president-elect’s plans could result in increased demand for health care real estate and for properties tied to infrastructure and R and D.
“Overall, we expect the real estate recovery, particularly the office sector, to lag the broader economic recovery by several quarters. This follows the pattern of previous cycles but with the added complication of getting people back into the workplace,” said Richard Barkham, CBRE global chief economist and head of Americas research, in the release. “Two factors are essential for this recovery to take hold: a medical resolution to COVID-19 through a vaccine and other measures, and another fiscal stimulus package.”
In real estate capital markets, CBRE expects that the improving economy, alongside aggressive quantitative easing by the Federal Reserve, will hold values stable and in some cases put downward pressure on capitalization rates. For now, there remains a wide gap between buyers seeking discounts and sellers not willing to offer them, but this gap will narrow over the course of the year, says CBRE.
Investors have about $300 billion earmarked for real estate investment, much of it in North America.
CBRE anticipates nearly 250 million square feet of industrial and logistics space to be absorbed in 2021, more than the previous five-year annual average of 211 million square feet. Adaptive reuse of retail space for logistics uses will accelerate.
Construction completions will rise by 29 per cent in 2021 from 2020, and rents will continue to increase. Office market fundamentals are expected to begin to recover in late 2021.
Suburban multifamily will outpace urban properties in the recovery. CBRE foresees U.S. multifamily returning to pre-pandemic occupancy levels in 2021 with rents fully recovering by 2022. Investment volume is projected to rise 33 per cent in 2021 to $148 billion, still well short of the 2019 total of $191 billion.